3-ketoacyl-CoA thiolase (KAT) (EC: 2.3.1.16) catalyses a key step in fatty acid beta-oxidation. Expression of the Arabidopsis thaliana KAT gene on chromosome 2 (KAT2), which encodes a peroxisomal thiolase, is activated in early seedling growth. We identified a T-DNA insertion in this gene which abolishes its expression and eliminates most of the thiolase activity in seedlings. In the homozygous kat2 mutant, seedling growth is dependent upon exogenous sugar, and storage triacylglycerol (TAG) and lipid bodies persist in green cotyledons. The peroxisomes in cotyledons of kat2 seedlings are very large, the total peroxisomal compartment is dramatically increased, and some peroxisomes contain unusual membrane inclusions. The size and number of plastids and mitochondria are also modified. Long-chain (C16 to C20) fatty acyl-CoAs accumulate in kat2 seedlings, indicating that the mutant lacks long-chain thiolase activity. In addition, extracts from kat2 seedlings have significantly decreased activity with aceto-acetyl CoA, and KAT2 appears to be the only thiolase gene expressed at significant levels during germination and seedling growth, indicating that KAT2 has broad substrate specificity. The kat2 phenotype can be complemented by KAT2 or KAT5 cDNAs driven by the CaMV 35S promoter, showing that these enzymes are functionally equivalent, but that expression of the KAT5 gene in seedlings is too low for effective catabolism of TAG. By comparison with glyoxylate cycle mutants, it is concluded that while gluconeogenesis from fatty acids is not absolutely required to support Arabidopsis seedling growth, peroxisomal beta-oxidation is essential, which is in turn required for breakdown of TAG in lipid bodies.